Headed for Ruin? The Chinese Quandary

All eyes have been focused on what has certainly proved to be a volatile week on the markets. With many heralding in “Black Monday” in terms of the falls within the Asian markets, online Forex trading has been massively affected by recent events. Spurred by weak growth data from the largest economy in the world, major indices such as the FTSE 100, the Dax and the CAC 40 took massive hits over the past few days. This has caused a shudder of uncertainty to resonate throughout the trading world; many Forex investors claiming that the markets were on the “verge of panic”.

A Return to Fear?

On Tuesday, the Shanghai Composite Index lost a massive 7.6% while the Nikkei Index closed more than 4% lower. Naturally, this prompted similar panic in the west as all of the major markets saw an exodus of risk-wary investors. This was equally reflected in the online Forex trading community as volatility levels dramatically increased and the dollar plunged against the Japanese yen. While some of this fluctuation has been stemmed with the announcement that China will cut its interest rates by 0.25 percentage points, many feel that we are indeed not out of the woods yet.

Not Ideal for the Range Trader

Many online Forex traders prefer to range trade; to buy low and sell high. This approach may not be seen for some time. Experts are still wondering whether the Chinese interest rate cuts will be enough to provide extra buoyancy to what is certainly a flagging economy. Considering that this country has seen steady growth since 1978, we may very well be heading into uncharted territory. It is therefore reasonable that many within the online Forex trading community will watch and wait to see what happens and if stability can return to the markets.

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